The state Senate announced a big boost in local revenue from the Meals and Rooms tax for 2022 last week. Locally, that meant $2.2 million more than a year ago from the tax. Keene received an additional $533,000; Winchester got about $100,000 more; Peterborough saw an increase of more than $154,000.
And while it is indeed welcome news, it’s important to put it into context.
The tax, placed on all dining out/prepared foods and accommodations in New Hampshire — yet somehow not considered a “broad-based” tax — has been part of the state’s revenue stream since 1967. One of the big benefits of the tax to cities and towns is that the law calls for the state, which collects the tax from restaurants and hotels, etc., to hand over 40 percent of the total to the communities from which it originated.
At least, that would be the benefit if New Hampshire lawmakers cared a whit about the law as it applies to them. But relying on a hodgepodge of revenues that never seem enough to pay for its obligations, the Legislature has habitually ignored that part of the statute. Even after the law was updated to mandate communities receive 75 percent of any increase in the tax, the state refused to do so. Typically, the amount sent back to cities and towns has run about 20 percent of what’s collected.
Consider that local communities already pay the lion’s share for most government in New Hampshire through the state’s regressive property tax system. Shorting local governments on what’s been promised just adds to the pain.
Upon being elected to the Senate representing District 9, Denise Ricciardi made it a mission to change that situation.
“Call me old fashioned, but I think a promise made should be a promise kept,” she wrote in a letter to The Sentinel last February. She proposed a bill to close that gap, calling for the state to cough up the promised 40 percent of the tax to municipalities. Somehow, the measure made it into the state budget, though reduced to 30 percent of the tax rather than the promised 40 percent. It wasn’t exactly what’s long been statutorily promised, but it’s an improvement.
That jump in percentage, though, doesn’t completely account for the bump in revenue. The state sent a total of $100 million back to municipalities this year, meaning it collected roughly $333.3 million in Meals and Rooms taxes for 2021. In 2020, the state collected $315.4 million, down from more than $350 million in 2019.
Why the drop? Well, consider how much the hospitality industry was hampered by the COVID pandemic in 2020. Hotels and restaurants were shuttered for weeks, and once they reopened, it was under strict conditions. Most people didn’t travel much or dine out at all until late in the year. To have reached the level it did was in itself remarkable.
One other factor: The Legislature in 2021 cut the tax from 9 percent to 8.5 percent, which went into effect in October.
This led to Gov. Chris Sununu proclaiming: “We cut the rooms and meals tax to its lowest level in more than a decade and yet we still sent even more money back to cities and towns. Instead of downshifting costs, we downshifted cash … a win for our citizens.”
This would be one of those cases where a politician strings together true statements to imply a context that simply doesn’t exist. Did the tax get cut? Yes. Did municipalities get more money? Yes. Are the two related? Not even remotely. To argue, as the governor apparently is, that saving a quarter on a $50 dinner bill or a dollar on a $200 hotel stay enticed more people to splurge over the final three months of 2021 is ridiculous. Add that he completely ignores the real reasons for the windfall: that 2021 was on the whole a better year for hospitality companies than 2020 and that Ricciardi’s proposal wound up with a 50 percent boost in the percentage returned to communities. Yes, Sununu certainly signed that budget into law, so he deserves a measure of credit. But his take on the win, while cleverly worded, was disingenuous at best.
Further, ignored in the excitement of the news was that if the state sent the full 40 percent of the Meals and Rooms tax back to cities and towns that the law mandates, the bump would have been $133.3 million.
How about meeting that obligation and “downshifting” the mandated amount of cash to communities being slammed by the Legislature’s school voucher debacle and longstanding refusal to fund the costs of a truly adequate education?